Saudi Arabia's non-oil economy records best performance since 2014 in January, says PMI

Saudi Arabia's non-oil economy had a strong start to 2025, with a significant improvement in the business environment. This was mainly due to the largest increase in total new orders since June 2011, which drove rapid expansion in economic activity and inventory levels.

The seasonally adjusted Riyad Bank Saudi Arabia Purchasing Managers’ Index (PMI) rose from 58.4 in December to 60.5 in January. The index not only indicates a significant expansion in operating conditions at the start of 2025, but also marks its highest level since September 2014.

Dr. Naif Al-Ghaith, Chief Economist at Riyad Bank, stated, "This strong performance underscores the resilience of the non-oil private sector, which benefited from a surge in new orders and a significant increase in business output." This demonstrates the positive momentum within the Saudi Arabian economy.

Four of the five sub-indicators of the PMI had a positive impact on the overall data in January, especially the new orders index, which rose by more than five points during the month. Notably, the index indicates that the growth rate of new orders reached its highest level in 13 and a half years.

Al-Ghaith added, "The output index reached its highest level in 18 months, highlighting strong demand conditions, with nearly 30% of companies reporting higher levels of activity. This expansion underscores the country's ongoing economic diversification efforts." These efforts are contributing to a more robust and sustainable economy.

The growth in export sales of Saudi Arabia's non-oil economy is another factor in the significant increase in total new orders. The latest data shows that foreign demand grew at its fastest pace in 18 months in January.

"Nearly 45% of companies observed an increase in sales, attributing this growth to positive economic conditions and the acceleration of infrastructure projects. The increase in export orders further supplemented domestic demand, especially from Gulf Cooperation Council (GCC) countries, reflecting effective marketing and competitive pricing strategies," he added.

To this end, Saudi Arabian non-oil companies reported a significant increase in activity levels in the first month of 2025, which was also the most significant increase in 18 months. This turnaround reflects strong expansion across all sectors monitored by the survey.

Companies in Saudi Arabia's non-oil economic sector have hired more employees for the ninth consecutive month, which has also helped reduce the amount of unfinished business.

Although increased demand has put pressure on companies' supply chains, average delivery times continued to shorten in January, and by the largest margin in 10 months. Subsequently, inventory levels of inputs and key components were high. The survey's purchased inventory index climbed to its second-highest level since data collection began in 2009.

The main downside of the latest results is the rise in overall cost pressures. Input price inflation for non-oil companies was the second fastest in nearly four and a half years. Companies stated that material prices rose due to stronger demand and geopolitical tensions. This led companies to raise output prices at the fastest rate in a year.

Al-Ghaith added, "The outlook for the non-oil economy remains very optimistic, with businesses expecting continued growth in demand and supportive market conditions throughout 2025." This positive outlook is a testament to the resilience and adaptability of the Saudi Arabian economy.

Al-Ghaith explained that improvements in the supply chain and higher procurement activity have enhanced operational efficiency and prepared businesses for continued growth. These indicators highlight the progress of Saudi Arabia's Vision 2030 as the economy diversifies and strengthens its non-oil base.